F W Woolworth

The year 2015 brought an end to one of the most enduring major retailers in the history of United States business. The Great Atlantic and Pacific Tea Company (universally abbreviated to A&P Tea Co) succumbed after a succession of bankruptcy proceedings played out in the early 2010s (bringing an end to 156 years of continuous retailing in the US).

A&P Tea endgame
The beginnings of A&P Tea’s decline in the retail world harks back as far as the 1950s – the source of the downward trend was its inability to maintain parity with competitors who were opening larger supermarkets that, driven by customer demand, were more modern[1]. Partial sell-offs followed in the seventies and eighties. Things didn’t really improve for the grocery ‘Goliath’ despite sporadic and ephemeral upsurges[2]. In 2010 the company filed for bankruptcy, but were only able to hold on till 2015 when A&P again filed for Chapter 11 bankruptcy, this time being permanently wound up.

A&P store, Westwood, NJ, 1959According to industry analysts A&P’s demise could be attributed to a misguide focus, and to the company’s failure “to evolve with the changing market”…A&P had a tendency to concentrate on “extracting dollars from its vendors instead of selling to its customers”. This exhibited a woeful neglect when it came to improving the customer experience (George Anderson, editor-in-chief of RetailWire)[3].

The company’s woes were exacerbated by a failure to modernise its look…it doggedly kept its grocery lines to the basics and was disinclined to adapt to changing tastes and interests of consumers with their growing preference for organic, healthy and gourmet foods. Meanwhile its competitors like Whole Foods, The Fresh Market and Kroger were stealing a march on the erstwhile market leader[4].

Humble leather goods origins
Atlantic and Pacific’s company history traces itself back to 1859, founded by George Gilman, as a sideline to his hide and leather importing business. Gilman’s diversification into mail-order tea was so successful that he dropped the leather and Gilman & Co by 1869 had become the Great Atlantic and Pacific Tea Co[5]. A&P Tea’s fortunes rose with the ascent of George Huntington Hartford who assumed control in 1878. George and his sons (affectionately known as “Mr George” and “Mr John”) oversaw the company’s inexorable growth and monopolistic practices[6].

A&P Tea at its zenith
At its peak in the 1930s (with the Hartford brothers still ensconced at the helm), A&P was by far the largest grocery chain in the US with 15,709 stores in 39 of the 48 states plus parts of Canada. The tea and coffee merchants had already diversified into bakeries and pastry and candy shops, and introduced innovations in food retailing such as pre-packaged meats and food-testing laboratories (pioneers of quality assurance)[7]. The Economy Store was another A&P concept: small stores located in secondary streets, away from the main street (comparison with King Kullen), inexpensive “no frills” lines; operated by only one or two staff members; low cost, high volume[8].

Slow to embrace the supermarket concept
The Hartfords were unimpressed by and reluctant to adopt the model of the supermarket, pioneered by King Kullen and others. Finally in 1936 A&P opened their first supermarket in Braddock, PA. Eventually the company’s supermarkets came to replace the increasing obsolete Economy Stores[9].

1928 A&P grocery adWhen it came to reading changing consumer preferences after WWII, A&P Tea, as was the case with F.W. Woolworth, was slow to move its stores from the urban centres to the suburbs, thus falling behind rivals like K-Mart, Safeway and Kroger in this respect. From the 1960s on A&P experimented with discount stores A-Mart (folded as its name was too like K-Mart!) and WEO (Warehouse Economy Outlet) with moderate results[9]…A&P sales continued to flatten out, it continue to jettison stores into the 21st century, with its market share haemorrhaging in the fierce onslaught of rising powerhouses such as Walmart[10].

PostScript: Legacy of the retailing ‘Goliath’
The heights to which Greater Atlantic and Pacific Tea Co rose in its heyday were of Everest proportions. Until 1965 A&P Tea Co was the largest US retailer of any kind…between 1915 and 1975 A&P was the largest food/grocery retailer in the US…until 1982 the company was also America’s largest food manufacturer. According to the Wall Street Journal A&P Tea Co was “as well known as McDonald’s or Google is today” and was lionised in the world of North American retail traders as “Walmart before Walmart”[11]. By the end of the 1920s A&P had become the first retailer to sell US$1 billion worth of goods[12].

The seeming ubiquity of Woolies?Woolworths is an internationally known name synonymous with traditional merchandising expertise. When I was a kid I thought that the Woolworths variety store-cum-supermarket chain in cities and towns strewn all around Australia and New Zealand was an offshoot of the famous pioneering Woolworths “dime and nickel” company in the US. Until I actually went to South Africa I wasn’t even aware that there was Woolworths in that country as well. When I did discover its existence travelling around the RSA garden route I initially assumed that it too was a spoke in the far-reaching American F W Woolworth imperial retail wheel.

A traditional urban myth punctured
Only much, much later did I learn of the total absence of any business or corporate connection between the three ‘Woolworths’ entities. Both the retail chain in Australasia and the one in South Africa got the name ‘Woolworths’ through the same legalistic loophole. When a collection of businessmen began the Australian retail enterprise they acquired the name because the original American company had not registered the name in NSW (or anywhere in Australia). Thus the first store in Sydney CBD’s Imperial Arcade in 1924 was called Woolworths Stupendous Bargain Basement. The transition to the eventual nomenclature used (simply ‘Woolworths’) was not quite that simple. Before settling on ‘Woolworths’, the first notion that came to Percy Christmas (Woolworth’s inaugural CEO) and his directors was to call it ‘Wallworths Bazaar’, a pun on the American retailer’s name[1].

Somerset Mall WooliesWestern Cape RSASimilarly, the South African ‘Woolworths’ acquired the name because there was no legal trademark impediment to it using the name in South Africa. Founder Max Sonnenberg and his son Richard started the first Woolworths store in Cape Town in 1931, and like the Australian namesake it has never had any financial connection to the prior existing F W Woolworth Co business. Woolworths South Africa-style was a different sort of retail animal, modelling itself on the upmarket British Marks and Spencer rather than the F W Woolworth bargain basement store concept[2].

Woolworths ground zero: Creating the retail template
The American phenomenon started in 1878 when Frank Winfield Woolworth, son of a poor potato farmer, started his first store in Utica, New York, the basis of his business strategy was to sell a wide selection of items at low price (initially all the merchandise was set at 5 cents each). The store was poorly located and failed abjectly but Woolworth persisted, opening a second dry goods and variety store the following year in Lancaster, Pennsylvania, and the formula eventually caught on. The entrepreneur expanded his store concept to a “five-and-dime” one (items set at 5¢ and 10¢ each).

The early F W Woolworth & CoWoolworth’s brother Charles (known as ‘Sum”) got in on the business, starting up his own retail stores soon after his older brother’s. Frank expanded F W Woolworth Co into a chain by mergers and partnerships with his cousin Seymour Knox I and with other relatives and friends❈. By gathering together a little club of owners Woolworth could purchase large quantities of goods directly from the manufacturers. As the US stores multiplied and prospered, Frank, remembering his own disadvantaged childhood, took pride in the fact that the “ordinary man” could afford to buy from Woolworth stores[3].

From 1890 FWW would embark on annual (sometimes biannual) large-scale buying trips to Europe, always paying the suppliers in cash on principle. Exposure to European manufacturers promoted awareness of market potentiality in other countries and may have prompted Woolworth’s eventual decision to branch out internationally. Anglophile Frank had his eye firmly on Britain as his 1890 trip diary indicates: “a good penny and sixpence store, run by a live Yankee, would be a sensation here”[4]. The chain had already extended north to Canada and subsidiaries were launched in the UK, Germany, Austria, Mexico and Cuba. The UK Woolworth sub-set itself opened stores in the Republic of Ireland, Palestine, Cyprus, the British West Indies and Southern Rhodesia (now Zimbabwe).

British F W Woolworth
Woolworths came to Britain in 1909 with the first store, selling clothing, stationary and toys, opening in Liverpool in northern England (family cousin Fred Moore Woolworth was the British arm’s first managing director). The pricing strategy matched the US “five-and-dime” one with items selling at 3d and 6d. The British chain flourished from the 1920s on, becoming a household name through the UK, so much so that most consumers in Britain and Ireland believed that their ‘Woolies’ shops were a local invention, “where sixpence once went a long way”[5].

Like the parent company in America, British Woolworths proved a retail innovator. The Liverpool store introduced lunch counters (followed by Blackpool and other large UK stores)回, which were the precursor to the standard food courts which became integral to shopping malls later in the 20th century[6]. The Woolies restaurants also adhered to the 3d and 6d price formula, although by 1941 there had been some increases, eg, a split lobster salad had risen to the princely sum of one shilling (12d or 1/-)[7].

Woolworth UK’s rise and fall
The 1930s marked a high point for Woolworth in the UK … outside of the Christmas season the chain was opening a new store every five days! During the price inflation of the late 1930s the Woolworth giant kept the sixpence limit on its prices by asserting its buying power to coerce suppliers into accepting lower margins for their goods¤. By 1958 F W Woolworth Co had amassed 1,000 branches in Britain[8].

The first signs of the downturn in Woolworth UK’s fortunes can be traced from the 1960s, the parent company forced the British arm into introducing Woolco, a series of one stop shops usually located out-of-town. These did not succeed, as they had in America because the UK lacked the US’s higher car ownership which suited out-of-town shopping. This was also an unwise move away from Woolworth UK’s strength, its high street stores. The UK business’ problems continued in the 1970s – Britain’s decimalisation in 1971 caught Woolworth unprepared because unlike other retailers it had resisted the move to self-service. The upshot was costly to Woolworth (£5 million and a five-year process trying to replace their over-abundance of store cash registers. Also in the 1970s a number of Woolworth stores in Britain and Northern Ireland burned down, attributed at least in part in incompetent and short-sighted management … resulting in brand damage to the trusted F W Woolworth name from which it never entirely recovered[9].

Closing down: Bromsgrove store (Worcs.)British elements (principally Kingfisher plc) finally gained a controlling interest in the UK enterprise in 1982, but Woolies, this British institution on the retail landscape ultimately fell foul of intense competition from cut-price retailers … many customers defected to British supermarket giants Tesco and Sainsbury’s. Falling sales❀ and a cash-flow crisis affected its entertainment arm. The downturn was exacerbated by the adverse effects of the Global Financial Crisis of the late 2000s. In 2007 Britain’s Woolworth Co experienced its first trading loss in 95 years … and much worst was to come. Over Christmas 2008 807 stores in the UK closed. With Deloitte’s administrating, the whole Woolworth chain had a complete shutdown over a 41 day period (months short of what would have been 100 years of operation in the UK). The carve-up saw restructure specialists Hilco Capital acquire the retail business and the Shop Direct Group (owned by the Barclay brothers) taking over the online retail sector … this too however was closed down in 2015[10].

Rise and fall of the prototype organisation
The America parent Woolworth company was spectacularly successful in creating a chain of “cash-and-carry” dime stores. By 1977 there were 3,414 stores in the US, Puerto Rico and the Virgin Islands and 1,884 outside of the US[11]. The pioneering merchandising methods of F W Woolworth with the founder’s emphasis on sales and customer service, and direct purchasing, established a solid base to enable his successors as CEO to continue to sustain and grow the Woolworth retail empire. However after WWII there was shift in the nature of shopping propelled by the burgeoning car culture … retailing in America and elsewhere moved on from the high street stores which had been the mainstay of Woolworth to the new malls located in the suburbs. Woolworth tried slowly to adjust but found itself less able to adapt to this change than its major competitors.

By the 1960s the original five-and-dime stores had morphed into other commercial entities: whilst the Woolworth flagship was retained there was a move into speciality stores and the large discount retail chain Woolco, which had a measure of success. Through the eighties and into the nineties the ailing FWW giant lingered on.

In 1997 F W Woolworth Co in the US folded, following years of diminishing competitiveness with its rivals (the chain in 1996 posted a crippling loss of $US37 million). The Venator Group took its place and F W Woolworth ceased to be a trading name. Venator’s retail focus fixed on the foot ware market with Foot Locker and Kinney Shoes. This was a sudden end to a gradual process by which Woolworth Five-and-Dimes were overtaken by the likes of more dynamic enterprises, Wal-Mart, Kmart (formerly Kresge), Target and other commercial players who adapted to change far better than the veteran Woolworth[12].

F W Woolworth Co ultimately suffered the same fate as the British Woolworth – an accumulated obsolescence. As Jennifer Steinhauer summarised its plight, it had “faded in the collective memory of a nation warmly nostalgic for old stores but not willing to shop in them”. The pioneering retailer had become increasingly irrelevant to American consumers … the advantage of convenience it once possessed (where shoppers could get “lipstick, diapers and a milk shake at a discount, all under the one roof”) was now all-too-easily available at the abundance of handy drugstores, supermarkets and discount stores popping up everywhere[13].

PostScript: South Africa and Australia – Higher and Higher
Whilst the Woolworths brand name no longer decorates the urban commercial landscape in the US and Britain, the Woolworths name in the Southern Hemisphere is a different story. Over the last 20 years both Woolworths Holdings Limited (RSA) and Woolworths Limited (Australia) have experienced impressive growth through expansion and diversification.

Woolworths Holdings Ltd (WHL) achieved a net income of R3.12 billion in 2015 as a provider of clothing, footwear, accessories, groceries, beauty products, home wares and financial services. WHL has pursued an aggressive campaign of expansion, taking over companies in South Africa (Mimco, Trenery) and Australia (David Jones stores, Country Road, Witchery).

Woolworths Casula (NSW)Woolworths Limited (WL) made a net surplus of A$1.2 billion in 2016 with its variety stores (Big W), supermarkets (Countdown, Food For Less, Safeway, Flemings, etc), grocers (Thomas Dux). Part of the company’s impressive growth has come from diversification – into petrol stations (Caltex-Woolworths) and into liquor stores (taking over BWS and Dan Murphy’s), hotels and gambling (Australian Leisure and Hospitality Group)[14]. The Aussie Woolworths brand currently maintains a presence in Australia, New Zealand and India▤.

Business success aside, it has not been all smooth sailing for the RSA and Australian companies … both WHL and WL have been embroiled in controversies in their home countries from time to time. In 2010 WHL removed Christian magazines from its shelves (a financial decision by Woolworths), provoking a huge outcry from the powerful Christian community in South Africa with WHL having to back down[15]. WL’s move into alcohol has been extremely profitable (together with Coles it is estimated to account for ¾ of Australian liquor sales). Allied to this is Woolworths’ impact on poker machine gambling … through its ALH arm it has in excess of 12,650 pokies in pubs. Anti-gambling campaigners have accused WL of targeting children to push up pub sales by offering loyalty reward cards to frequent gamblers (and placing “Kid’s Club” playgrounds close to the poker machine areas in its hotels)[16].

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❈ FWW’s mergers absorbed Knox & Co, Kirby & Co, Charlton & Co, C S Woolworth & Co and Moore & Co
回 the concept was an elaboration on F W Woolworth’s ‘Soda Fountain’ introduced in his Lancaster (US) store in 1907
¤ a similar bullying practice to that used by Woolworths Australia (and its rival Coles) this decade against local manufacturers
❀ one exception being the old Woolies favourite, the pick ‘n’ mix confectionary lines
▤ in 1989 Industrial Equity Ltd (IEL), part of the AdSteam Group (Adelaide Steamship Company), successfully took over Woolworths Australia … however the Woolworths company was subsequently publicly floated several years later